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TWE rejects $3.05bn takeover proposal

Trevor Chappell

Winemaker Treasury Wine Estates (TWE) will slash hundreds of jobs as part of major cost cutting moves after rejecting a $3.05 billion takeover proposal from a US investment firm.

TWE, whose labels include Penfolds, Lindeman's and Wolf Blass in Australia and Beringer and Chateau St Jean in the US, revealed on Tuesday it had rejected a $4.70 a share takeover proposal from Kohlberg Kravis Roberts & Co (KKR).

It said it preferred to focus on its plans to improve performance, address various structural challenges facing the business and cut costs.

"The (TWE) board has considered the KKR proposal in the context of these renewed plans and concluded that the proposal does not reflect the fundamental value of the company and it is therefore not in the best interests of shareholders," TWE said.

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KKR said on Tuesday that its advisers had held talks with certain TWE shareholders on a confidential basis in the last week.

TWE shares soared in the wake of the takeover proposal, climbing 73 cents, or 17.94 per cent, to $4.80.

Meanwhile TWE announced it will axe hundreds of jobs and take other measures to reduce costs by $35 million in fiscal 2015.

Chief executive Michael Clarke, who has been in the top job just seven weeks, said the jobs to be lost would be "in the hundreds".

"Basically, it's just over five per cent of our workforce that we're addressing, but we're not going to get into specific numbers on that front," Mr Clarke told reporters and market analysts.

TWE has more than 3,500 employees globally.

As well as cutting jobs and costs, TWE will spend about 50 per cent more on marketing its wine brands, giving priority to global brands such as Penfolds and Wolfblass and regional brands such as Chateau St Jean.

Mr Clarke said TWE's brands had suffered from a lack of marketing investment.

In the last three years, overhead costs had lifted at the expense of brand investment, which was not sustainable.

Morningstar consumer stocks analyst Daniel Mueller said the TWE board looked like it wanted to see how TWE would fare under the new plans outlined by Mr Clarke, so any takeover proposal would have to very compelling to be accepted.